Home Sales Sliding?

Interesting article...

Breaking from NewsMax.com and MoneyNews.com

Even the sunniest of optimists have to be a tad concerned over the direction of the U.S. housing market.

Especially after the National Association of Realtors announced that pending sales of existing homes slid for the fifth straight month.

The NAR reports that its index for pending sales was down 1.1% in January, to 116.3. The Association notes that the figure was 4.8% below January of 2005. That rate, the NAR adds, was lower than the average monthly decline of 3% that economists have seen in the last four months of 2005.

David Lereah, chief economist for the NAR, told Dow Jones Newswires that he's seeing "the soft landing we've been expecting" for the U.S. housing market. "We are at a much more sustainable level of home sales now - a welcome cooling from the super-heated conditions that were driving exceptional price gains," Mr. Lereah added. He also said that home sales continue to be solid and should provide a lift for the overall U.S. economy.

David Koenig, Associated Press business writer, sees things a bit differently. While he agrees that the five-year housing boom is finished, he writes in his lead on March 6 that "judging from growing statistical evidence and the performance of some of the nation's leading builders, the slowdown is already rippling through the economy."

He points out that not only new homes but used homes (by 2.8%)declined in January. Koenig adds that Toll Brothers Inc. reports that new home contracts declined 21% from the same time in 2005, as more homebuyers back out of contracts.

But Koenig isn't entirely pessimistic.

"Still, the prospect of a housing slowdown appears less frightening than it did a few months ago, according to those who track the industry," he writes. "There seems to be little concern that a much-touted housing bubble will lead to a collapse in sales and prices."

Economists seem to agree. New Federal Reserve Chairman Ben Bernanke said last month housing would enter a moderate slowdown but not a crash.

And William Mack, a housing analyst for Standard & Poor's, predicted "a soft landing. The overall market is just taking a step back."

New homebuyers may be able to take advantage of the softer market: Dallas-based Centex is offering $25,000 off on its homes, a practice that the homebuilder had already put into play in California.

"Around the country, builders are throwing in incentives ranging from financing help to free upgrades like swimming pools and granite countertops," says the AP story. "Some equal 10 percent of the home's list price."

The AP story also reports that the median price of existing single-family homes has fallen $219,700 in July to $210,500 in January, according to the National Association of Realtors. Investors have subsequently been bearish on homebuilder stocks. That has miffed building company executives who say that their companies are undervalued despite record earnings.

Alex Barron, an analyst in San Francisco for JMP Securities, told Koenig that builder stocks have been trading at relatively low multiples of their earnings since the late 1990s because investors always believed the strong housing market was too good to last.

"Investors kept saying, 'Next year housing will go down,'" Barron said. "I guess they're finally right."

I haven't quite made up my mind about what is happening to the housing market but I definitely see some changes. What are you thoughts ?